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Shell plc
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== Risk == === Strategic risks === The company is exposed to macroeconomic risks including fluctuating prices of crude oil, natural gas, oil products and chemicals.<ref name=":0">https://reports.shell.com/annual-report/2022/strategic-report/risk-factors.html</ref> The company's ability to deliver competitive returns and pursue commercial opportunities depends in part on the accuracy of its price assumptions.<ref name=":0" /> Shell's ability to achieve its strategic objectives depends on how it reacts to competitive forces.<ref name=":0" /> Rising concerns about climate change and effects of the energy transition could continue to lead to a fall in demand and potentially lower prices for fossil fuels. Climate change could also have a physical impact on its assets and supply chains. This risk may also lead to additional legal and/or regulatory measures, resulting in project delays or cancellations, potential additional litigation, operational restrictions and additional compliance obligations.<ref name=":0" /> Investments in the company's low-carbon products and services may not achieve expected returns.<ref name=":0" /> Shell operates in more than 70 countries that have differing degrees of political, legal and fiscal stability. This exposes the company to a wide range of political developments that could result in changes to contractual terms, laws and regulations. Shell and its joint arrangements and associates also face the risk of litigation and disputes worldwide.<ref name=":0" /> The increasing adoption of renewable energy sources and policies promoting decarbonization may reduce the demand for fossil fuels, affecting Shell's traditional business and requiring a strategic shift towards cleaner energy solutions. === Operational risks === Russia’s invasion of Ukraine has affected the safety and security of its people and operations in these and neighbouring countries. The resulting sanctions and export controls and the evolving geopolitical situation have caused wide-ranging challenges to its operations which could continue in the medium to longer term.<ref name=":0" /> The estimation of proved oil and gas reserves involves subjective judgements based on available information and the application of complex rules. This means subsequent downward adjustments are possible.<ref name=":0" /> Shell's future hydrocarbon production depends on the delivery of large and integrated projects and its ability to replace proved oil and gas reserves.<ref name=":0" /> The nature of Shell's operations exposes it, and the communities in which it works, to a wide range of health, safety, security and environment risks.<ref name=":0" /> A further erosion of the business and operating environment in Nigeria could have a material adverse effect on the company.<ref name=":0" /> An erosion of Shell's business reputation could have a material adverse effect on its brand, its ability to secure new resources or access capital markets, and on its licence to operate.<ref name=":0" /> Shell relies heavily on information technology systems in its operations.<ref name=":0" /> Shell's business exposes it to risks of social instability, criminality, civil unrest, terrorism, piracy, cyber disruption and acts of war that could have a material adverse effect on the company operations.<ref name=":0" /> Production from the Groningen field in the Netherlands causes earthquakes that affect local communities.<ref name=":0" /> Shell is exposed to treasury and trading risks, including liquidity risk, interest rate risk, foreign exchange risk and credit risk. The company is affected by the global macroeconomic environment and the conditions of financial and commodity markets.<ref name=":0" /> The company's future performance depends on the successful development and deployment of new technologies that provide new products and solutions.<ref name=":0" /> Shell has substantial pension commitments, the funding of which is subject to capital market risks and other factors.<ref name=":0" /> The company mainly self-insure its hazard risk exposures. Consequently, the company could incur significant financial losses from different types of risks that are not insured with third-party insurers.<ref name=":0" /> Many of the company's major projects and operations are conducted in joint arrangements or with associates. This could reduce Shell's degree of control and its ability to identify and manage risks.<ref name=":0" /> Shell undertakes large-scale projects, such as oil and gas field development or refinery expansions. Delays or cost overruns in these projects can impact profitability and investor confidence. === Conduct and culture risks === Shell is exposed to regulatory and conduct risk in its trading operations.<ref name=":0" /> Violations of antitrust and competition laws carry fines and exposes the company and/or its employees to criminal sanctions and civil suits.<ref name=":0" /> Violations of anti-bribery, tax-evasion and anti-money laundering laws carry fines and exposes the company and/or its employees to criminal sanctions and civil suits.<ref name=":0" /> Violations of data protection laws carry fines and exposes the company and/or its employees to criminal sanctions and civil suits.<ref name=":0" /> Violations of trade compliance laws and regulations, including sanctions, carry fines and exposes the company and its employees to criminal proceedings and civil suits.<ref name=":0" /> As a multinational company operating in multiple jurisdictions and with multiple governments, Shell must comply with a multitude of anti-corruption laws, such as the Foreign Corrupt Practices Act (FCPA) in the US and the UK Bribery Act. Non-compliance or unethical practices can lead to significant legal and reputational risks, which can have long lasting effects on the company. The increase in regulation of greenhouse gas emissions worldwide is an important policy that Shell must follow closely. Operating in dangerous sectors such as the petroleum industry means that Shell may face lawsuits or regulatory investigations focused on different aspects of its business/operations, including environmental impact, safety incidents, or antitrust violations. This can result in financial penalties, damage in reputation and disruptions in worldwide operations. The recent incidents in its Nigeria-based operation where there is not only added such as: security issues surrounding the safety of its people, host communities and operations; sabotage and theft; and the company's ability to enforce existing contractual rights. Further, the risks include litigation; limited infrastructure; potential legislation that could increase the company's taxes or costs of operations; the impact of lower oil and gas prices on the government budget; and regional instability created by militant activities. Moreover, the Nigerian government is contemplating new legislation to govern the petroleum industry which, if passed into law, could likely have a significant adverse impact on Shell's existing and future activities in Nigeria. === Other risks === The company’s Articles of Association determine the jurisdiction for shareholder disputes. This could limit shareholder remedies.<ref name=":0" />
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